From founding an enterprise to selling it – Entrepreneurship in Finland
Authors: Oona Hosia & Oona Varjanto
Entrepreneurship gives responsibility and freedom to build a product or service by using own competencies. It acquires bearing all the possible risks in order to gain success. In Finland, there are many entrepreneurs, but many people do not recognise the possible struggle they have went through in order to get their company known and how they did it.
People often think that business owners have it easy as they might not be able to see everything that happens ‘’behind the scenes.’’ Many businesses only show their success in social media and elsewhere, which creates the feeling that there might not be a lot of struggle going on. ‘’I think there is a misconception about the life of start-ups, it’s not glamorous, at all. You see people on Facebook and Instagram posting stories about how things are going but that is only one side of the story. In every phase, there are different challenges. And this is not exceptional, it’s typical entrepreneurship. I realized this after meeting and talking with other entrepreneurs, they do experience the same thing. Struggles are certainly a part of the game.’’ (Rahman, 2020)
The idea for this topic of the essay came up, when we both read the book called EXIT (Kiviranta & Mäenpää, 2019) and analysed the business successes of the companies and how they have gotten to the point of business acquisition. As we were both interested how entrepreneurship in Finland works, we decided to research the topic. The essay will include following topics: book reflection, starting a business, running a business, business acquisition and reflection of Proakatemia studies.
The book that we have both read is called EXIT – inspiring stories of different entrepreneurs that created their success from zero. All stories show how difficult it is to create a successful product or service and how failing multiple times can create eventually something incredible. In the book the entrepreneurs tell honestly about their success as well as failure. Many people have not seen the difficult side of being an entrepreneur and this book reveals the reality of all the tough moments and how it all affects not only to the company, but to personal lives. For example, in the book, the founder of Jungle Juicebar, Noora Fagerström, tells that all banks refused to give the company a loan and they had to apply for a personal one instead. This reflects well on how successful entrepreneurs do not give up, even when the times get rough.
Which quality repeats in successful entrepreneurs? – ‘’Perseverance. Exceptional curiosity: an entrepreneur is always wondering why this could not be done like this or that way’’. (Puro, 2019)
The stories in the book inspire people who are wanting to become entrepreneurs to not give up even in a situation where it feel that the business is not going anywhere. Many of the stories included a period when the business owner had struggles. For example, the CEO of Onnibus tells that when starting the business, other people in the same field did not believe in his success and his idea was laughed at. Nowadays the company is more known in Finland than McDonalds.
The book proves that being an entrepreneur in Finland is not easy, but at least in these cases all the struggles and failures have paid off. It requires a lot of work and a certain mindset, but it can turn out to be something exceptional. As a students of entrepreneurship module, the book was interesting and eye-opening since it gave us new points of view to entrepreneurship.
Starting a business
When starting a business, it is vital to first develop a business idea. This idea could be an existing one used in a different form, or a completely new one. At this point of starting, it is important to ask for opinions and advices for the idea as well as do a market research to find the needs of the customers.
It is needed to make a concrete business plan identifying the goals and how they can be achieved. Nowadays there are many business plan templates, which will make it easier to create a comprehensive plan. As there are many risks in entrepreneurship, planning is an essential part of starting a business. The business plan needs to focus well on analyses, research and strategies. The bigger the goals, the more specified the plan needs to be. ‘’Yes, it is true that most businesses fail. It is also true that many of them succeed. Those succeed are not the result of miracles. Entrepreneurs who lead businesses to success understand that it takes a carefully planned and executed strategy. A little luck also helps.’’ (Meszaros, 2019)
After the planning process, advices should be taken from professionals of the field. This could mean other companies or places that offer business advice in Finland, for example Finnish Enterprise Agency (Uusyrityskeskus) and Enterprise Finland (Yritys-Suomi).
The next part would be the financing of the business and choosing either debt or equity financing. There are many options, however, it is crucial to think of a financing method that is suitable for your business. In Finland, a financing company called Finnvera grants loans to entrepreneurs starting a business. Taking a loan will give you the full freedom of ownership, but when selling shares to investors usually advices and help is also received. A loan needs to be always paid back, whereas investors only receive the money when the business is profitable. In Finland, entrepreneurs also has the possibility to apply for a startup grant (starttiraha) from TE services. This is not financing for the company but for the entrepreneur itself to cover the costs of living. (Uusyrityskeskus, 2019)
As there are many different types of company forms, it is necessary to do a proper research of which one is the most suitable for your company. If the sales revenue is at its minimum and there are not a lot of costs involved, a sole trader (toiminimi) might be the best option. This could be a good company form for example to hairdressers, masseurs, lawyers and cosmetologists.
If there is more than one person opening a business, the company form could be partnership (avoin yhtiö). In this form two persons signs a partnership agreement where responsibilities and liabilities are decided.
The most common company form is limited company (osakeyhtiö) which is suitable for many kinds of businesses. The entrepreneur is not personally responsible for the debts of the limited company. One can found a limited company alone, but always needs to have at least one vice member in the board of the company. (Yrittäjät, 2020)
The before mentioned forms are the most common ones, but there are more different options and all the companies should choose the most suitable one for them.
Running a business
An entrepreneur will face a lot of struggles and will need to spend a lot of time on creating new ideas, following the vision and strategy, researching and planning. By doing those well, the business will most likely experience growth and keep going, even after the first five years, when most businesses fail.
Most entrepreneurs have a mindset of hard work and problem-solving, which helps to overcome failure and try again until the success is there. For example, in the book the owner of Kovanen yhtiöt OY, Eeva Kovanen shares the challenges on the way of running a company. The family business was inherited from her dad and uncle, which led to conflicts between the cousins. During the financial crisis of 1990, when Eeva was still young the family kept running the company, even though it was not profitable back then. They were running it together with a few people in the garage. The struggles where hard, but they did not give up. Later when she was the owner of the company, she gave always a 100% for it, even to the point where she was having discussions with her lawyer during labour.
The main reason for the failure is the lack of planning. Even though many are prepared to start a business, they might not be ready for all the struggles. As Matias Mäenpää (Co-Founder of LEAP, former CEO of Visma PPG Oy) says: “You must have big goals and courage to say them aloud”. The attitude and resilience of the entrepreneur plays a big role in the success of the company.
Crucial part of a successful business are employees and the leadership skills of the CEO. Kimmo Riihimäki (CEO of Vesivek) said: “Entrepreneur has responsibility of its employees, you can´t only think of yourself.” He has always worked himself and done the grunt work with the employees. Even now when the company has over 400 employees, he wants to know or at least meet everyone face to face. He also has realized that you cannot demand anything from the employees, if they are not feeling satisfied and appreciated, they most likely will not give 100% of themselves to the company and therefor there will not be results.
In acquisition, a company purchases all or most of the shares of another company, receiving authority of the acquired business. (Kenton, 2019 ) In some cases, the owner of the sold company might continue as CEO or in other C-level position.
After achieving building a successful company, often the buyers get interested. When the initial interest occurs and if the entrepreneur is willing to sell, the sales negotiations will commence. Some companies might want to sell their company rapidly, without sparing a lot of thought, but most want to find a buyer that matches the company’s vision and will hopefully follow it as well. In the book, it explained how the process of the sales negotiation has went and that the business owners took a lot of time and effort to find the correct buyer for the company in all the cases. It also underlined the fact that acquisition should not be the main goal when starting a business, but the result of the hard work for the company you love.
It is important to reserve enough time for the negotiations as the process is long and letting go of the business one has built for many years can be emotionally hard.
Ville Skogberg (co-founder of Nebula) tells that acquisition was rough since the selling process required working all the evenings and weekends continuing in the mornings of meetings with the board or customers. He reminisces one time when the negotiations had lasted over midnight and he had six hours before the next meeting in the morning. Because he was so exhausted and suffered from heartburn he could only sleep in a sitting position, supported by his wife. Long lasting negotiations can be tiring and requires a lot of effort, as well as a right mindset from the entrepreneur.
In article published by Forbes (Harroch, 2018), 12 important factors of acquisition are listed. In addition to the before mentioned fact that acquisitions takes a long time, these important factors can be found from the article: knowing the value of the vendible company, understanding that the buyer wants to do due diligence investigation of the company, all the financial figures will be checked thoroughly and the acquisition agreement is crucial to do accurately.
Reflection of Proakatemia studies
Luckily Proakatemia students get to experience the life of an entrepreneur early during their studies. As entrepreneurship requires a lot of time and effort, Proakatemia is an excellent place for people to see if they really want to become ones. How is it to run your own business, what are the obstacles that you might face and how to overcome them. This will help the students to understand if they want to be entrepreneurs in the future as well or what kind of role would they want for themselves in a business. Being a part of a team and building it helps the students to understand with what kind of people they want to work with and that is very important for the future. This all helps to find people with similar work mindset, increase the motivation level and if founding a company, to do it with the right people.
Starting everything from scratch is the best way to learn since it gives the opportunity to get to know each step through the hard way. It is not the fastest way to start a business, but it is the most efficient way to assure the knowledge of the field. In addition to the entrepreneurship knowledge, Proakatemia prepares students with great soft skills, which is increasingly important part of running a business. As Kim Väisänen (co-founder of Blancco) said: “Businesses only grow through people, you can´t take humans out of the equity”. All the businesses are run by and the purchases made by humans and Proakatemia gives great readiness to the communication and teamwork skills required in successful companies. Kimmo Riihimäki (CEO of Vesivek) summarized his thoughts about businesses well: “From humans to humans.” The real passion towards one´s enterprise is the genuine want to help people and that is a starting point for successful business.
Harroch, R. (27. August 2018). Forbes. Noudettu osoitteesta https://www.forbes.com/sites/allbusiness/2018/08/27/mergers-and-acquisitions-key-considerations-when-selling-your-company/#6fc1a3504102
Kenton, W. (4. September 2019 ). Investopedia. Noudettu osoitteesta https://www.investopedia.com/terms/a/acquisition.asp
Kiviranta, A.;& Mäenpää, M. (2019). EXIT. Alma Talent Oy.
Meszaros, G. (31. 07 2019). 50 REASONS WHY SOME BUSINESSES FAIL WHILE OTHERS SUCCEED. Noudettu osoitteesta successharbor: https://www.successharbor.com/why-some-businesses-fail-while-others-succeed-02132015/
Puro, J. (28. 08 2019). MITEN TEHDÄ ONNISTUNUT EXIT? UUSI KIRJA AVAA TARINOITA YRITYSKAUPPOJEN TAKANA. Noudettu osoitteesta itewiki: https://www.itewiki.fi/blog/2019/08/miten-tehda-onnistunut-exit-uusi-kirja-avaa-tarinoita-yrityskauppojen-takana/
Rahman, D. (4. 02 2020). Entrepreneurs of Finland. Noudettu osoitteesta Entrepreneurs of Finland: https://www.entrepreneursoffinland.fi/dont-become-an-entrepreneur-daniel-rahman-co-founder-ceo-of-integrify/
Uusyrityskeskus. (2019). Guide. Noudettu osoitteesta Becoming an Entrepreneur in Finland: https://www.uusyrityskeskus.fi/wp-content/uploads/2019/05/SUK_perustamisopas2019_ENG_VERKKOON.pdf
Yrittäjät, S. (2020). Yrittäjät. Noudettu osoitteesta https://www.yrittajat.fi/yrittajan-abc/perustietoa-yrittajyydesta/yrityksen-perustaminen/valitse-oikea-yhtiomuoto-565987